According to the announcement from Chongqing M&E (02722), on May 22, 2026, the parent company, the company, and the target company Chongqing Chengfei New Materials (a non-wholly-owned subsidiary of the company), along with Chongqing General Industry and Tibet Xuhuo, signed a capital increase agreement. The parent company agreed to inject capital into the target company at a price of RMB 1.1929 per share, paying a total of RMB 270 million in cash, of which RMB 226.34 million will be used as the target company's new registered capital and RMB 43.66 million will be used as the target company's capital reserve. After the completion of the capital increase, the parent company, the company, Chongqing General Industry, and Tibet Xuhuo will hold 20.2297%, 51.3733%, 27.1363%, and 1.2607% of the target company's equity, respectively.

Before the capital increase, the company directly held 64.40% of the target company's equity and indirectly held 34.02% of the equity through Chongqing General Industry, with a total shareholding ratio of approximately 98.42%. After the capital increase, the company will directly hold 51.3733% of the target company's equity and indirectly hold 27.1363% of the equity through Chongqing General Industry, with a total shareholding ratio of approximately 78.5096%. Therefore, the target company will continue to be a controlled subsidiary of the company and will be included in the company's consolidated financial statements.

The parent company has strong industrial chain integration capabilities, a strong brand influence, and high recognition in the industry. After the completion of the capital increase, the parent company, as a direct shareholder of the target company, is expected to leverage its industry position to help the target company further expand market channels, consolidate customer trust and cooperation relationships, fully release internal synergy effects, and comprehensively enhance the company's core competitiveness.

During the "14th Five-Year Plan" period, the company will focus on high-end equipment, new materials, and new energy fields while promoting investment and mergers and acquisitions. By not participating in the capital increase, it will be beneficial for the company to better coordinate and optimize capital and resource allocation, concentrating on key areas and merger opportunities that align more closely with the "14th Five-Year Plan" and the company's strategic direction. After the capital increase, the target company will still be a controlled subsidiary of the company, and its financial performance will continue to be included in the company's consolidated financial statements. The capital increase and deemed sale will not affect the company's business development or profitability. The legal rights and interests of the company and its shareholders will not be harmed, and such transactions (i.e., the capital increase and deemed sale) are in line with the long-term interests of the company and its shareholders.

After the completion of the capital increase, the target company will still be a controlled subsidiary of the company, and its financial performance will continue to be included in the company's consolidated financial statements. The capital increase and deemed sale will not affect the company's business development or profitability. The legal rights and interests of the company and its shareholders will not be harmed, and such transactions (i.e., the capital increase and deemed sale) are in line with the long-term interests of the company and its shareholders